MARKET WATCHCold weather, pipeline fire boost prices
Energy prices rebounded Feb. 8, with the front-month crude price closing at a new high for this year in New York as the fundamentals of supply and demand were reasserted via a frigid cold front in the eastern US and a pipeline fire that shut in 95% of production at the Elk Hills oil and gas field near Bakersfield, Calif.
HOUSTON, Feb. 9 -- Energy prices rebounded Feb. 8, with the front-month crude price closing at a new high for this year in New York as the fundamentals of supply and demand were reasserted via a frigid cold front in the eastern US and a pipeline fire that shut in 95% of production at the Elk Hills oil and gas field near Bakersfield, Calif.
"Blistering cold weather is still on the loose. Since [Feb. 4], six feet of snow has fallen in parts in New York, and the National Weather Service predicts that more snow is on the way," said analysts at the Houston office of Raymond James & Associates Inc.
A fire Feb. 6 at the Elk Hills field shut in most of the production of 120,000 boe/d. It is the largest gas field in California, Raymond James reported, but its production is 60% liquids. The fire was ignited when a gas leak in a pipeline exploded; it has since died out. However, field operator Occidental Petroleum Corp. has declared a force majeure suspending contractual deliveries from that field. No timeframe has yet been set for returning the field to production.
The March crude contract again tested market resistance at $60/bbl Feb. 8, trading as high as $59.87/bbl on the New York Mercantile Exchange. "Crude's up tick since the start of the year has met firm resistance at $60/bbl," said Raymond James analysts. "Again, we believe the fundamentals underlying the oil market support such a move, although there will likely be profit-taking and short-covering since prices have shot up about $9/bbl in the last 3 weeks, a result of continuing cold weather and added geopolitical risk. Iranian leader Ayatollah Ali Khamenei cautioned about challenging its nuclear program, as further pressure could provoke antagonistic targeting of US interests worldwide," they said.
"Technically, the strength of [the Feb. 8] closing rally has thrown crude oil back into positive momentum," said Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland. Both the Feb. 2 and Feb. 8 rallies "shared not only the same magnitude and timing but also almost the same starting point and closing point," he said.
The March contract for benchmark US light, sweet crudes jumped by $2 to $59.71/bbl, the highest front-month crude closing on NYMEX since late December. The April contract escalated by $2.08 to $60.43/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up $2 to $59.72/bbl. Heating oil for March delivery gained 5.89¢ to $1.73/gal on NYMEX. The March contract for reformulated blend stock for oxygenate blending (RBOB) increased by 5.18¢ to $1.59/gal.
The March natural gas contract gained 16.2¢ to $7.87/MMbtu on NYMEX. On the US spot market, natural gas at Henry Hub, La., climbed by 13.5¢ to $8.06/MMbtu.
In London, the March IPE contract for North Sea Brent crude rose by $1.80 to $59.03/bbl. However, gas oil for February lost $4.50 to $514.75/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 11 benchmark crudes dropped 77¢ to $53.52/bbl on Feb. 8.
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